Alcon Q1 2025 Earnings Report

Alcon EPS Results

• Actual EPS: $0.73
• Consensus EPS: $0.76
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: $0.78

Alcon Revenue Results

• Actual Revenue: $2.33 billion
• Expected Revenue: $2.52 billion
• Beat/Miss: Missed by -$194.93 million
• YoY Revenue Growth: N/A

Alcon Announcement Details

• Quarter: Q1 2025
• Date: 5/13/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 14, 2025
• Conference Call Time: 8:00AM ET

Alcon (NYSE:ALC) researches, develops, manufactures, distributes, and sells eye care products for eye care professionals and their patients worldwide. The company's Surgical segment offers equipment, instrumentation and diagnostics, intraocular lenses (IOLs), and other implantables; and consumables, including viscoelastics, surgical solutions, incisional instruments, surgical custom packs, and other products for surgical procedures. Its cataract products include Centurion vision system, LenSx laser system, ARGOS biometer, LuxOR surgical ophthalmic microscope, SMARTCATARACT health platform, NGENUITY 3D visualization system, Verion reference unit and Verion digital marker, and ORA system for intra-operative measurements; custom pak surgical procedure packs; vitreoretinal products comprising constellation vision systems, procedure packs, lasers and hand-held microsurgical instruments, and grieshaber and MIVS instruments, as well as scissors, forceps and micro-instruments, medical grade vitreous tamponades, and Hypervit vitrectomy probes; refractive surgery products, including WaveLight lasers and Contoura Vision used for LASIK treatment; EX-PRESS glaucoma filtration device; and implantable products, including AcrySof IQ products, such as monofocal IOLs and advanced technology IOLs for the correction of presbyopia and astigmatism at the time of cataract surgery. Its Vision Care segment provides daily disposable, reusable, and color-enhancing contact lenses; ocular health products, such as dry eye, glaucoma, contact lens care, and ocular allergies; and ocular vitamins and redness relievers. The company was formerly known as Alcon Universal S.A. and changed its name to Alcon Inc. in December 2001. Alcon Inc. was founded in 1945 and is headquartered in Geneva, Switzerland.

Alcon Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the Alcon First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Cravens, VP of Investor Relations.

[Operator]

Thank you. You may begin.

[Daniel Cravens, Vice President, Global Investor Relations at American Airlines]

Welcome to Alcon's first quarter twenty twenty five earnings conference call. Yesterday, we issued a press release, interim financial report and presentation. You can find all these documents on our website at investor.alcon.com. Please note that starting this quarter, in order to streamline our reporting, the interim financial report and other filings will be limited to information required by regulations. Non IFRS results, including constant currency growth and core items, will only be presented in the press release and presentation.

[Daniel Cravens, Vice President, Global Investor Relations at American Airlines]

Joining me on today's call are David Endicott, our Chief Executive Officer and Tim Stonesipher, our Chief Financial Officer. Our press release, presentation and discussion will include forward looking statements. We expressly disclaim any obligation to update forward looking statements as a result of new information or future developments, except as required by law. Our actual results may differ materially from those expressed or implied in our forward looking statements And as such, you should not place undue reliance on any forward looking statements. Important factors that could cause our actual results to differ materially from those in our forward looking statements are included in our Form 20 F, earnings press release and interim financial report, which are all on file with the Securities and Exchange Commission and available on their website at sec.gov.

[Daniel Cravens, Vice President, Global Investor Relations at American Airlines]

Non IFRS financial measures used by the company may be calculated differently from and may not be comparable to similar measures used at other companies. These non IFRS financial measures should be considered along with, but not as alternatives to the operating performance measures as prescribed per IFRS. Please see a reconciliation between our non IFRS measures with directly comparable measures presented in accordance with IFRS in our press release. For discussion purposes, our comments on growth are expressed in constant currency. In a moment, David will begin by recapping highlights from the first quarter.

[Daniel Cravens, Vice President, Global Investor Relations at American Airlines]

After his remarks, Tim will discuss our performance and outlook for 2025. Then David will wrap up and we will open the call for Q and A. With that, I'll now turn the call over to our CEO, David Endicott.

[David Endicott, CEO at Alcon]

Thanks, Dan, and thanks everybody for joining us today. As we sit here in mid May, it is remarkable to reflect on how dynamic this year has been so far. First, we've begun a cascade of product launches that will grow our business for years to come punctuated by the launch of Unity VCS in both Japan and The U. S. Second, we acquired a majority position in a great long term asset in Arianne Biotech with the potential to change the standard of care in corneal transplantation.

[David Endicott, CEO at Alcon]

And third, there's been an obvious disruption in the global trade environment. And yet at Alcon, I remain encouraged by the strength and resilience of our underlying business performance. So while the current tariff structure introduces new headwinds, our global network of 17 manufacturing sites and decades of operational experience position us well to implement mitigating strategies. In most cases, we make products in region for region and have the ability to transfer production across sites. However, our existing manufacturing footprint is optimized for a predominantly free trade environment.

[David Endicott, CEO at Alcon]

Shifting production across sites requires stable trade policy along with time and capital. We will adapt to whatever final policy decisions are made, but in the meantime, we continue to work with Abiomed, MedTech Europe and our local Chinese affiliate to advocate for a MedTech exemption or a zero for zero tariff regime. We remain deeply committed to access to eye care. And a zero for zero tariff structure supports uninterrupted care by ensuring patients and providers can receive the products they need when they need them. In a few minutes, Tim will walk you through our thinking on the current tariff environment.

[David Endicott, CEO at Alcon]

Now I'll shift to discussing the first quarter. We delivered sales of $2,500,000,000 and sales growth of 3%. We also delivered a core operating margin of 20.8% and core diluted earnings of $0.73 per share. Despite another soft quarter in The U. S.

[David Endicott, CEO at Alcon]

Surgical market, these results are a testament to the breadth of our geographic footprint and product portfolio as well as the commitment of our talented teams across the globe. I'm pleased to report that at the recent American Society of Cataract Refractive Surgery Conference, we officially launched Unity VCS and PanOptix Pro. The Unity launch is the culmination of more than ten years of work by our R and D and engineering teams informed by invaluable input by key opinion leaders around the world. I'd like to take the opportunity to thank all of our teams who've been involved in this transformational change in ophthalmic surgery. Unity VCS is a combined console for both vitreoretinal and cataract surgery, while Unity CS is a standalone cataract system that will be available toward the end of the year.

[David Endicott, CEO at Alcon]

The platform is designed to deliver superior efficiency for both types of procedures, while continuing to deliver exceptional outcomes and safety. System features many first to market technologies designed to deliver transformative surgical innovation. For example, four d Phaco delivers twice as fast lens removal with 41% lower energy delivered to the eye. Additionally, HyperVit 30 ks is the world's fastest vitrector and is 1.5 times faster than the existing best in class. Lastly, Unity Intelligent Fluidics creates greater stability and control at each procedural step.

[David Endicott, CEO at Alcon]

Unity VCS has received CE Mark and regulatory approvals in Australia, Japan and The U. S. And we will begin delivering new units later this month. Now I'll turn to implantables where we recently launched PanOptix Pro. We believe this next generation technology builds on our market leading position and keeps us on the forefront of innovation.

[David Endicott, CEO at Alcon]

This lens builds upon the success of the world's most implanted trifocal PCIOL by reducing the amount of light scatter by 50%. Our surgeon research suggests that light scatter is a key driver of dysphotopsias such as halos and glare, which is why we're so excited about PanOptix Pro. This lens is now available in The U. S. And initial surgeon and patient feedback has been excellent.

[David Endicott, CEO at Alcon]

We look forward to bringing it to select international markets later this year. Now shift to Vision Care, starting with contact lenses. I've been extremely pleased by the performance of all of our innovative lenses built upon our water gradient technology. Our major recent innovations including PRECISION1 family, the TOTAL30 family and DAILIES TOTAL1 for astigmatism grew double digits in the first quarter. We launched PRECISION seven at the start of this year and it's gaining traction with both doctors and patients.

[David Endicott, CEO at Alcon]

Wearers benefit from sixteen hours of outstanding comfort even on day seven due in part to our active flow system which keeps lenses moist by leveraging a moisturizing agent in the lens with a replenishing agent. Additionally, wearers appreciate the intuitive seven day replacement schedule, which enhances patient compliance and satisfaction, offering a great choice if a daily disposable SiHy lens is not an option. For eye care professionals, this lens allows them to meet diverse patient needs with a lens that balances innovation, comfort and cost effectiveness. As a reminder, PRECISION seven targets a reusable lens category, which we estimate is worth approximately $3,800,000,000 and where Alcon is under indexed. Now I'll turn to ocular health, I'll start with SUSTAIN Pro.

[David Endicott, CEO at Alcon]

SUSTAIN Pro is the only triple action multi dose preservative free formulation for all types of dry eye. The unique formulation includes hyaluronate and offers patients up to twelve hours of relief. Additionally, the moisture technology helps reduce friction on the eye surface providing both comfort and protection while blinking. This could be a meaningful improvement for patients who experience irritation or discomfort with their current drops. SUSTAIN Pro has been available in The U.

[David Endicott, CEO at Alcon]

S. Since February and we're continuing to expand its rollout to major retailers nationwide. Next, I'll comment on occultrabund, our dry eye pharmaceutical candidate. We continue to expect an FDA response to our filing at the May, in line with the PDUFA date that we received last year. Our team has been working hard ahead of the launch.

[David Endicott, CEO at Alcon]

We've expanded our eye drop sales force in The U. S. We now have a group dedicated to glaucoma and a separate group dedicated to dry eye. Additionally, we continue to engage with payers where appropriate. Now turning to BD and L activity, we have two recent exciting developments.

[David Endicott, CEO at Alcon]

First, I'm pleased to report that we acquired the majority interest in Aureon Biotech. Aureon is at the forefront of regenerative medicine. The company's flagship therapeutic candidate AURN-one has received breakthrough therapy and regenerative medicine advanced therapy designations from the FDA. It could represent a paradigm shift in the treatment of corneal endothelial dysfunction, which is a condition leading to corneal edema, vision loss and potential blindness. One is an allogeneic cell therapy comprised of corneal endothelial cells derived from healthy donors and a Rho kinase inhibitor that enhances cell survival and integration.

[David Endicott, CEO at Alcon]

One is administered as a single intracameral injection following a surgical intervention on the corneal endothelium. This therapy offers a minimally invasive alternative to traditional corneal transplants, which are limited by donor availability and surgeon complex. One is currently approved in Japan under the trade name Viznova. In The U. S, we plan to launch Phase three clinical trial activities late this year and we aim to bring the product to market in mid to late twenty twenty eight.

[David Endicott, CEO at Alcon]

Given the scale of the unmet need, we expect peak sales of $05,000,000,000 or greater. Now we also entered into a definitive merger agreement to acquire Lens AR. The acquisition includes the Ally robotic cataract laser treatment system. We intend for this next generation technology to ultimately succeed LENS X as our femtosecond laser assisted cataract surgery platform. We're excited for the opportunity to bring LENS AR's unique next generation technologies into our innovative equipment portfolio.

[David Endicott, CEO at Alcon]

The transaction is anticipated to close in mid to late twenty twenty five subject to customary closing conditions, including regulatory approval. Finally, I'll briefly discuss market dynamics for the first quarter. In cataract, we estimate that global procedures grew low single digits. Additionally, global ATIOL penetration was up approximately 200 basis points year over year. In both cases, the main growth driver was international markets.

[David Endicott, CEO at Alcon]

In contact lens, the retail market remained solid in the first quarter. We estimate that it grew approximately mid single digits in line with historical trends. Now with that, I'll pass it to Tim, who will take you through our financial results and discuss our outlook.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Thanks, David. Our first quarter sales of $2,500,000,000 were up 3% versus prior year. This growth is slightly lower than recent trends and reflects approximately one point of headwind from our divestiture and out licensing of eye drops to Ocumension in China in the fourth quarter of twenty twenty four. In our surgical franchise, revenue was up 2% year over year to 1,300,000,000.0 Implantable sales were $420,000,000 in the quarter in line with the prior period. We saw another quarter of strong growth in advanced technology IOLs in China and other international markets.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

This was offset by soft market conditions in The U. S. That David mentioned earlier as well as competitive pressures. In consumables, our first quarter sales were up 6% to $712,000,000 driven by VitRet and cataract consumables, particularly in international markets and price increases. In equipment, sales of $199,000,000 were down 6% year over year.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Following the recent launch of Unity VTS, we continue to expect equipment sales to meaningfully accelerate through the second half of the year. Turning to Vision Care, first quarter sales of $1,100,000,000 were up 3%. Contact lens sales were up 4% to $688,000,000 in the quarter, primarily due to product innovation as well as price increases. As David mentioned, we continue to see strong growth across the PRECISION1 and TOTAL 30 families as well as DAILIES TOTAL1 for astigmatism. This growth was partially offset by declines in legacy products where we have limited our promotional efforts.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

We also faced a strong prior year quarter mainly driven by the timing of price increases. In Ocular Health, first quarter sales of $432,000,000 were up 2% year over year. Growth was primarily driven by the sustained family of artificial tears as well as price. There was also approximately three points of pressure resulting from the divestment of certain eye drops to Ocumension in China that I mentioned previously. Now moving down the income statement.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

First quarter core gross margin was 63.2%, broadly in line with the prior year. Core operating margin was 20.8%, down 40 basis points primarily due to increased investment in R and D. First quarter interest expense was $49,000,000 broadly in line with last year. Other financial income and expense was a net benefit of $9,000,000 also broadly in line with last year. The first quarter average core tax rate was 21 compared to 23.2% in the prior year period as last year included a net expense from discrete items.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Core diluted earnings were $0.73 per share in the quarter in line with last year on a constant currency basis. Turning to cash, we generated $278,000,000 of free cash flow in the first quarter compared to $229,000,000 in 2024 due to higher cash from operations. Before turning to the outlook, I want to take a few moments to address tariffs. As we think about the tariff impact, we're providing our best estimate based on a set of assumptions and an evolving environment. As David mentioned, our global manufacturing footprint was built and optimized for a free trade environment.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

In most, but not all markets, we are fortunate to manufacture in region for region. However, while we're able to relocate manufacturing, shifting production intelligently requires a stable trade environment. We've completed a thorough assessment of the current tariffs and mitigation strategies available to us. These strategies include supplier diversification, optimizing our manufacturing network, managing discretionary spend and implementing selective price actions. As of today, we estimate that the gross impact from these tariffs will pressure cost of sales by approximately $80,000,000 for the full year versus our outlook in February.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

As the cost of tariffs are capitalized in the inventory and then flow into the income statement as goods are sold, we expect to see nearly all of the gross impact in the second half of the year. We expect to fully offset the tariff pressure through operational actions and currency tailwinds. Importantly, these estimates do not reflect any potential impact related to future tariffs and trade policy changes. Now moving to our outlook for the remainder of the year. Our current guidance assumes that the aggregate global eye care market grows approximately 4%, that exchange rates as of mid May hold through year end and that the tariff rates and exemptions announced as of May 12 persist through the end of the year.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Now starting with sales, we are updating our full year revenue guidance to $10,400,000,000 to $10,500,000,000 which reflects the favorable foreign exchange environment. Additionally, given the soft U. Surgical market, we are updating our sales growth rate guidance to between 67% in constant currency. In terms of phasing, we continue to expect sales growth to meaningfully accelerate in the second half of the year given the timing of the new product launches. Moving to operating expenses, we expect incremental R and D expense following our recent BD and L activity.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

However, we expect to remain within our range of 8% to 10% of sales. Additionally, we expect SG and A to step up in the remainder of the year. We expect the highest spend in the second quarter due to normal seasonality and the timing of new launches. Turning to profitability, we now expect full year core operating margin to be between 2021%. This updated range reflects approximately 80 basis points of pressure from recent BD and L activity versus our February outlook.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Moving down the income statement. Following the consolidation of Orion, we now expect non operating income and expense to be between $185,000,000 and $2.00 $5,000,000 Turning to tax, we continue to expect our full year core average tax rate to be approximately 20%. Based on all these factors, we now expect our core diluted earnings guidance range to be between $3.5 to $3.15 per share. This updated range reflects a $0.10 of impact from recent BD and L activity. This range corresponds to year over year growth of between 25% in constant currency.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Before I wrap up, I'm pleased to announce that our Annual General Meeting last week shareholders approved a dividend of $0.02 8 per share in line with our payout policy of 10% of the previous year's core net income. Want to thank our shareholders for their continued support. And finally, I want to take a moment to thank our associates across all levels of the organization. Your dedication and focus continue to drive our performance and position us for long term success.

[David Endicott, CEO at Alcon]

So to conclude, we remain confident in the long term fundamentals of the eye care market and our business. 2025 is a watershed year for us. We're bringing a wave of groundbreaking products to market each designed to help improve site and set new standards of care. These launches reflect the strength of our pipeline, our deep understanding of customer needs and our commitment to shaping the future of eye care. Our continued investment in research and development along with strategic acquisitions further fuels our innovation engine and expands our capabilities.

[David Endicott, CEO at Alcon]

And we're excited about what's ahead and confident in our ability to drive long term growth through purposeful market leading innovation. We appreciate your continued support and look forward to updating you on our progress next quarter. So with that, let's open the line for Q and A.

[Operator]

Thank you. We will now be conducting a question and answer session. Please limit yourselves to one question and one follow-up. The first question is from Veronika Dubajova from Citi. Please go ahead.

[Veronika Dubajova, Managing Director at Citi]

Hi, guys. Good afternoon and thank you for taking my questions. I have two, please. The first one is just on the shape of the organic growth rate through the remainder of the year, Tim. I can push you a little bit more on sort of how do we get from the three to the six to seven.

[Veronika Dubajova, Managing Director at Citi]

Could you give us a bit of flavor on where you expect the second quarter to land and just how much faster the growth in the back half of the year is going to be and kind of what is the biggest moving part or two related to that growth acceleration and your degree of confidence in those? And then if I can follow-up here. Go ahead, Tim. Actually, I'll do my follow-up afterwards. Go for it.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Yes. Well, first of all, welcome back, Veronica. Yes. So again, this plan has always been based on growth acceleration in the back half of the year, driven by the cadence and the timing of the product launches. So I'm not going to give Q2 guidance, what I what we do feel very comfortable with is this we will see, call it, high single digit revenue growth in the back half of the year.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

And what's going to drive that, Unity VCS, we're very excited about PanOptix Pro, you look at Precision seven, Sustained Pro. So as we've talked about in the past, a lot of these launches are coming out in the back half of the year, and we expect that to take us to the 6% to 7% revenue growth for the total year.

[Veronika Dubajova, Managing Director at Citi]

Got it. That's helpful. And then my follow-up, probably more for David, but obviously one of the sort of growing investor concerns out there that we hear a lot in our conversation is just The U. S. Cataract market continuing to be so subdued.

[Veronika Dubajova, Managing Director at Citi]

And are you confident that this is just a market issue or is this also a competition issue? So I'd love to get your thoughts, David, on why are we not seeing a better growth rate here? And sort of how comfortable are you with the assumption that you can maintain your sort of competitive advantage, in particular, in the prenatal end space? Thanks.

[David Endicott, CEO at Alcon]

Yes. Well, thanks Veronica and again welcome back. Listen, I think the share thing I think we feel pretty good about. We're pretty much on where we had expected to be. The market is a little surprisingly soft I think in the first quarter to us.

[David Endicott, CEO at Alcon]

I think we have seen that really in the third and fourth quarters as we've mentioned. So see it again the first we'd hoped not to. Obviously, we've adjusted our market to about a 4% growth for the year as a consequence. Look, think as we wrap around last year, we're going to see a much better growth rate to begin with. But at the core of it, this is a surgeon productivity issue because there's tons of cataracts that are not being done.

[David Endicott, CEO at Alcon]

We know that wait lines, for example, wait lists are getting longer. We know that the surgeons that some of the busiest surgeons in the country have generally been the target of private equity acquisitions. And when they do that, they're generally retiring or taking a step back. And it takes a little while for the younger guys to come along and fill up the volumes and the skill set that they're losing. So we've heard kind of consistently that while we're improving efficiency per surgeon, it's not yet where it was.

[David Endicott, CEO at Alcon]

And I do think the beauty of that for us is we're launching Unity VCS right into that circumstance where we're going to be telling people, look, if you do this and use this properly, you can do more surgeries in a day, whether that's VitRet or whether that's cataract. But I do think that the cataract market normalizes over time. I feel like we've seen over the years pretty consistently in The U. S. A three percent growth.

[David Endicott, CEO at Alcon]

I expect that to return to normal the rest of this year.

[Veronika Dubajova, Managing Director at Citi]

Excellent. Thanks guys.

[Operator]

The next question is from Jack Reynolds Clarke from RBC Capital Markets. Please go ahead.

[Jack Reynolds-Clark, VP - European MedTech Equity Research at RBC Capital Markets]

Hi there. Thanks for taking the questions. The first one I had was on contact lenses. I was wondering if you could break down the impact of the kind of the timing differences on pricing versus kind of legacy product declines in the quarter? And then what that means for the exit rate coming out of Q1 and what you've seen so far in Q2?

[David Endicott, CEO at Alcon]

Yes. Well, I probably won't comment too much on Q2, but let me just talk about where we are with the quarter on contact lenses. Look, the audited data around the world looks like it was a very healthy market. And I think that should be encouraging to people because the consumer looks healthy. The U.

[David Endicott, CEO at Alcon]

S, there was unit growth, there was mix trade up, there was price in the market and the market grew in The U. S. About 7%. So we're still seeing that kind of mid single digit growth globally and we expect that to continue for the year. Now for our number, we were wrapping around 11% growth last year.

[David Endicott, CEO at Alcon]

We're doing a sequential growth from fourth quarter to first quarter at we finished 11%. So we do a 4%. If you look at that on average accommodating pricing volume movements that accommodate price increases. Last year we pulled a little in last year last quarter we pulled a little in. So it just moves around a little bit across the quarter.

[David Endicott, CEO at Alcon]

I would think about this as normalizing continue to normalizing above market growth and we expect market growth to be in the kind of mid single digits range.

[Jack Reynolds-Clark, VP - European MedTech Equity Research at RBC Capital Markets]

That's great. Thank you. And then I had a couple on Orion. So the new guidance implies a fairly substantial EBIT loss from ORION. I was wondering if you could give a breakdown of what is comprised within that cost, I.

[Jack Reynolds-Clark, VP - European MedTech Equity Research at RBC Capital Markets]

E, kind of the breakdown of clinical trials versus R and D versus kind of more standard OpEx? And then what your expectations are for clinical trial costs in 2026 through to 2028 when the product launches?

[David Endicott, CEO at Alcon]

Yes, I think you've got the numbers right. It's about 80 bps this year. And again, it's almost all R and D. So I would think about it really as R and D in progress. We generally don't break apart our clinical activity or our R and D core R and D stuff.

[David Endicott, CEO at Alcon]

So I would probably avoid doing that today on this particular topic. I would say that we're excited about this program that we will take it into clinic late this year. And we're excited about the response we've gotten recently from the FDA on the trial progress. So I think we have good alignment with FDA at this point. And I think excellent folks running this program.

[David Endicott, CEO at Alcon]

So we're excited about the team and the program because this really is one of the things that helps patients a lot. It's a big deal. I mean this is corneal transplant folks that can't really get to that around the world unless this product kind of succeeds. So we're excited about the program and the folks.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

And then Jack, maybe to help you out for 2025, I would just if you're looking at your models, I would model that into your R and D and I would space it evenly between 2Q, 3Q and 4Q.

[Jack Reynolds-Clark, VP - European MedTech Equity Research at RBC Capital Markets]

Okay. Understood. And should we expect an uplift next year?

[David Endicott, CEO at Alcon]

We'll give you guidance next year on it. It will be part of a blended R and D program. We won't break out the program specifically. We generally don't do that.

[Jack Reynolds-Clark, VP - European MedTech Equity Research at RBC Capital Markets]

Understood. Thanks very much.

[Operator]

The next question is from Graham Doyle from UBS. Please go ahead.

[Graham Doyle, Executive Director, Equity Research at UBS Group]

Good morning. Thanks, guys. Thanks for taking my questions. Just kind of follow-up on Verano's question. I know you don't love to do a quarterly guidance, but I think it's not unfair to ask it given we've had a downgrade on revenue guidance in Q3 and we've had it now on the back of the Capital Markets Day and a recent guide.

[Graham Doyle, Executive Director, Equity Research at UBS Group]

So just trying to understand the things that give you confidence on this acceleration, right? Presumably, we're looking at a 5% or something in Q2 and then a seven eight or something as we go through the rest of the year. So is it that you've got a really strong order book already for Unity? Are you seeing great traction with PanOptix Pro? Just to give us some like concrete pieces that underpin your assumptions will be super helpful, please.

[David Endicott, CEO at Alcon]

Well, let me start with the market. I mean, the reason for the narrowing of the range and again, I think we're comfortable with what we said, it was the first quarter. I mean, at the core of it, The U. S. Market was soft in the fourth quarter.

[David Endicott, CEO at Alcon]

When you do the math on that, you take it forward. It's going to be unrealistic, I think to get the acceleration we need to get to an eight. On the other hand, we feel really good about 6% to seven and we feel like maybe we do better than that, but that's really there's still a lot of variance in the new product flow. Starting with the basics on this, the second quarter we think is a normal quarter. I think it should be roughly around markets a little bit better than market growth.

[David Endicott, CEO at Alcon]

And then as you kind of work your way into the back half of the year, think Tim just said it, we're going to see steady significant acceleration through the third quarter and into the fourth quarter. Because remember, we haven't shipped any PanOptix Pro till this month. We haven't shipped any Unity VCS until the end of this month. We haven't shipped a whole bunch of the PanOptix Pro to the retailers until really getting through the end of first quarter. So you really haven't seen any new product flow other than P7 hitting right now and maybe sustain Pro a little bit.

[David Endicott, CEO at Alcon]

But I think as you get through all of that, really the massive, kind of massive, the kind of substantial change in trajectory occurs on the back of a very strong reception to Unity VCS, a very strong reception to Voyager, a very strong ASCRS output on PanOptix Pro. We got pre orders in Japan on Unity VCS, we feel good about. So yes, we have a lot of pre orders. We need to fill those and we'll do that over time. The only gating factor I feel like on Unity VCS will be our ability to kind of install it, make sure we ship it on time, make sure everybody uses it correctly, make sure we take the time that's required to get the most out of that machine because is genuinely a phenomenal piece of equipment and we've consistently heard that.

[David Endicott, CEO at Alcon]

There's a lot more to it than that. So we're launching seven new products, maybe more than that actually when you get into the specifics of smaller. So there's just a lot going on, Graham. And I think it just doesn't play out in the front half.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

I think the other way we've been describing this in prior calls is we think there are about 30,000 units out there. It's a ten year lifespan. So we've kind of said, hey, look, feathered in 3,000 a year. Front half of the first couple of years are probably a little bit more than that, back half would be a little bit less than that. So if you do that kind of math and then you layer that into the back half of the year, that's going to give you a nice revenue lift.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

So that's just if you want to try to do it numerically, I would try to do that kind of math and you'll see that we get some pretty nice revenue growth or we expect some pretty nice revenue growth.

[Graham Doyle, Executive Director, Equity Research at UBS Group]

Okay. That's really helpful. Just a quick cheeky one, which is just do you guys have visibility on that to like those preorders and how that's flowing through in early indications, does that give you the comfort on Q3, Q4? Is that kind of where that's coming from rather than just it's a great product and the market should take it? Is there a good indication of interest to a reasonable level that gives you that comfort?

[David Endicott, CEO at Alcon]

Yes.

[Graham Doyle, Executive Director, Equity Research at UBS Group]

Super clear. All right.

[Graham Doyle, Executive Director, Equity Research at UBS Group]

Thanks a lot. I'll jump back in the queue.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

That was a cheeky answer to a cheeky question. Thanks, Graham.

[David Endicott, CEO at Alcon]

Guys.

[Operator]

The next question is from Ryan Zimmerman from BTIG. Please go ahead.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Good morning or good afternoon. Thanks for taking our questions. When we think about the components of guidance, the market obviously is down 50 basis points from your prior assumptions. But embedded within that six or 7% is about two fifty basis points from innovation new products. And within those two fifty basis points, I assume is some price impact.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

So I'm wondering, David, you've kind of parse out in terms of how you think about price versus new product contributions within that incremental two fifty basis points for the year? And then I have a follow-up.

[David Endicott, CEO at Alcon]

Well, I mean, I would think about the year in total as getting the typical price we get. I I would think about it as we're getting typically a couple of points of price every year. If we can keep up with inflation, we're pleased with that. And I think that's typically where we're trying to get to. So, I mean, I would think about that versus the rest of the unit growth and trade up and I would think about new products as the gap fill.

[David Endicott, CEO at Alcon]

And there is a lot of enthusiasm around the products right now. I think I just came off of two major meetings, the JOS in Japan and Tokyo and then also in Los Angeles, we had the largest surgeon meeting in the world for The U. S. That was I mean, the enthusiasm around the product flow that we have right now is very significant. And I think, we need to execute and we've got a lot to do, but I would just say, I feel really good about where we are for the remainder of the year.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Okay. And then, Tim, I think you called out SG and A being highest in 2Q, but sales are arguably going to be higher in the back half of the year. I'm just curious kind of why we wouldn't see a higher SG and A rate in second half given kind of the pacing and again the top line kind of cadence if you will?

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Yes. There are really three factors in that Q2 comment. I mean, first of all, if you just look at seasonality, we do we have a lot of advertising on promos, particularly around the DTC area. So if you were to go back to say 2022, '20 '20 '3 and 2024, the average incremental spend Q1 to Q2 is roughly $40,000,000 So again, that's typical seasonality. I would expect that to hit again in Q2 of this year.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

And then there are really two other things. The one is that we did have some phasing from Q1 to Q2. We had some favorability in Q1 that we weren't anticipating. Those costs will come through in Q2. I'd call that maybe $15,000,000 or so.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

And then lastly, we have the investments behind the product launches. So we talked a lot last year about how much we're investing in the products and we want to make sure that we invest appropriately to drive that revenue growth. So you're going to see that starting to hit in Q2. And then as you get to Q3, Q4, kind of back out that DTC piece, whatever you put in there for that, and then it will start to normalize.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Okay. Thank you.

[Operator]

The next question is from David Saxon from Needham and Company. Please go ahead.

[David Saxon, Senior Analyst at Needham & Company]

Great. Good morning. Thanks for taking my questions. Maybe two product related questions. The first one is just on PanOptix Pro and how you're thinking about that launch relative to the your competitors recall and now relaunch.

[David Saxon, Senior Analyst at Needham & Company]

Has that created any meaningful opportunities? And then also just against the backdrop of weaker U. S. Market?

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Well, we're starting to lose you.

[David Endicott, CEO at Alcon]

Hey David, you got kind

[David Endicott, CEO at Alcon]

of garbled there a little bit.

[David Endicott, CEO at Alcon]

No.

[David Endicott, CEO at Alcon]

No. Not really.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

All right. Well, here, let's try.

[David Endicott, CEO at Alcon]

There it is. You got it. We got you now.

[David Saxon, Senior Analyst at Needham & Company]

Okay.

[David Saxon, Senior Analyst at Needham & Company]

Yes. So just on PanOptix Pro.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Now we lost you.

[David Endicott, CEO at Alcon]

But let me do PanOptix Pro and then I'll if you come back on, we can take another one.

[David Saxon, Senior Analyst at Needham & Company]

Has

[David Saxon, Senior Analyst at Needham & Company]

that created any meaningful opportunity? Then also

[David Saxon, Senior Analyst at Needham & Company]

Hey, Sachi, why don't we move on to the next one?

[David Endicott, CEO at Alcon]

Let me take the pro part of it, because I can handle that. So look, David, on PanAPIX Pro, we're obviously excited about that. One of the things I said in opening remarks was, the big thing in HEIOLs, particularly trifocals has been halos and glare. It's something that we've been working on for a while. PanOptix Pro has 50% less scatter, which is really the source of halos and glare.

[David Endicott, CEO at Alcon]

We expect to see a really important uptake as a function of using more light in the lens. And I think that's been a really exciting thing. It's been well received. Certainly, it was well received in Los Angeles. And I think we expect surgeons are going to try it.

[David Endicott, CEO at Alcon]

Relative to VNL recall, I really wouldn't comment on that. I think they're back in business. They're going to be a fierce competitor no matter what and we're obviously excited about what we've got.

[David Saxon, Senior Analyst at Needham & Company]

Okay, great. Thanks for that. And then the second one is just on the PDUFA date coming up in a couple of weeks now. I guess once you hear on that or get the response, what is left to do before the launch? Can you get that out in late second quarter here in a limited fashion at least?

[David Saxon, Senior Analyst at Needham & Company]

Or would that fall into third quarter? And then I mean, I'm assuming all that investment is baked into guidance, but anything to call out other than Tim what you just said around SG and A for the second half? Thanks so much for taking my questions.

[David Endicott, CEO at Alcon]

Yes, of course. And know what you're right about the incremental investment. Mostly and when we commented on the sales force addition that's obviously a big part of investment. We'll have back loaded investment as well for 05/12, which will support that launch. We do think the launch will have it will happen probably in the third quarter, but late in the third quarter.

[David Endicott, CEO at Alcon]

We have to manufacture it. We got to the PIs and the labels all put together. So obviously, we don't get to do that until we get the final word and agreement with FDA on what those labeling will look like. So look for that late third quarter and so there'll be a limited effect this year.

[David Saxon, Senior Analyst at Needham & Company]

Great. Thanks so much.

[Operator]

The next question is from Larry Biegelsen from Wells Fargo. Please go ahead.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

Good morning. Thanks for taking the question. Guys, this is the latest in the call that a tariff question, I think, has come up in Q1 earnings. So here's the tariff question, Tim. The quarterly cadence, I assume it ramps through 25%.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

So will Q4 be the highest impact and lowest gross margin in the year? And how should we think about the annual impact for 2025? Can you still grow margins year over year given the tariff impact? And I had one follow-up.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Yes. As I said in the prepared remarks, the gross impact of the tariffs will be primarily in Q3 and Q4. And that's because when you incur the tariff, you put it in you basically amortize it. So it takes time to work its way through the P and L. So we've obviously we've said that we will offset that in 2025.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

So we do expect margins to be pretty close to what we guided at the beginning of the year. And then as we get into 2026, we'll give you color then. There will probably if these were to stick for the full year, you would have an annualized impact. So you'd have more gross pressure. But at the same time, you'd also have probably more mitigation efforts, whether it's pricing, whether it's manufacturing movements or things of that nature, which we would obviously prepare for.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

But we're sort of looking for a stable environment before you need a stable environment before you start making a lot of those moves.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

All right. And Tim, you gave some long term goals at the Capital Markets Day a few months ago. How does the change in the macro environment including the tariffs affect the outlook especially the 12% to 15% ex FX core diluted EPS growth? Thanks for taking the question.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Yes. Listen, we still feel good about our long term goals. Those goals are five year goals. So obviously, there's been we have a very dynamic environment as we speak here today, which is very different than it was last quarter, which may be different next quarter. So I would say long term, we feel very good about the fundamentals of the business.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

We're going to continue to invest in innovation, and we feel that if we do that, we will grow faster than the markets, whatever that market rate is. We obviously have demonstrated in the past that we have a very good handle on our cost envelope. We'll continue to manage that responsibly. And when you grow faster than the market and manage your cost responsibly, you'll get margin expansion that drops down to free cash flow. So we feel very good about all that.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

All right. Thanks so much.

[Operator]

The next question is from Patrick Wood from Morgan Stanley. Please go ahead.

[Patrick Wood, Managing Director at Morgan Stanley]

Beautiful. Thanks guys. I'll keep it at one. Love the commentary on the contact side around what you're seeing on the consumer. I'd love to sort of dig in a little bit between cataract and contact and the different regions, what you're seeing, whether it's that mix of new fittings, you mentioned the data on The U.

[Patrick Wood, Managing Director at Morgan Stanley]

S. Side, which we get, but how is that looking in EMEA, for example? And then when we think of the IOL side, how we're thinking about the marginal mix there? Like are we seeing people shift to like mono plus efemto or is that not a thing? I'm just anything on the consumer and the marginal kind of volume mix super interested there?

[Patrick Wood, Managing Director at Morgan Stanley]

Thanks.

[David Endicott, CEO at Alcon]

Yes. Let me just say that the international markets have been very solid, really all last year and through the first quarter certainly solid pretty much everywhere. We've seen a few the contact lens in Japan is soft in the market. I think it's been pretty low single digits. But on the other hand, we've seen some real growth areas in The United States and in a few other markets that have done well.

[David Endicott, CEO at Alcon]

I think the expectation mean, the surprising thing maybe to some, and I think we've said this historically is that the consumer is relatively well positioned at this point. And I would make two points on that. One is, our contact lens mix on units was up and our unit volumes were up. So there wasn't a in the first quarter at least there was a pretty healthy U. S.

[David Endicott, CEO at Alcon]

Consumer and international consumer. So all around the world that seemed to be pretty okay. I think that tells you a little bit more about just this business, which is people who wear contacts get used to wearing them and they stay in them. And so I think that's just the nature of the resiliency of these markets. The second one is just on the ATIOLs.

[David Endicott, CEO at Alcon]

And I do think again, there's always been some question or commentary about well, what do we see in the ATIOL penetration. And around the world, we saw 200 basis points of movement up in ATIOL in the first quarter. So these are people who are choosing not to get monofocal lenses and to pay out of pocket for ATIOLs, which again is healthy. As you know, we have two thirds of The U. S.

[David Endicott, CEO at Alcon]

PC IOLs and we have more than half of the total IOLs. So when the market moves to ATIOLs, that's a good thing. And in The U. S, it was up 100 and some odd basis points internationally. It was up more than that.

[David Endicott, CEO at Alcon]

China obviously is helping the international market a lot, but really kind of across the board Europe and a number of other markets were really solid on that point. So I would tell you that kind of the regional mix with the exception of the productivity issue we observed in the market in The U. S, we feel pretty good about the fundamentals in the market. And this thing in The U. S, we're just going to have to wade through.

[David Endicott, CEO at Alcon]

I think there is a turnover of surgeons that are going to require the younger surgeons to pick up their game a little bit. And I look forward to helping them. I think we've got some really great assets to move them forward. And I think if you look at what Voyager does for productivity, if you look at what Unity VCS does for productivity, when you look at what Pro can do for conversion, these are things that help productivity in office and I think that's where we're headed.

[Patrick Wood, Managing Director at Morgan Stanley]

Thanks. Love the color.

[Operator]

The next question is from Anthony Petrone from Mizuho Group. Please go ahead.

[Anthony Petrone, Managing Director Equity Research at Mizuho Financial Group]

Thanks. Maybe two product questions here. Just a little bit on P7, we're doing optometrist checks and they're actually coming back quite positive on P7. So maybe just where that product is tracking in terms of expectations for 2025? And then the second product question would be on AR 15512,

[Anthony Petrone, Managing Director Equity Research at Mizuho Financial Group]

just in terms of dry eye.

[Anthony Petrone, Managing Director Equity Research at Mizuho Financial Group]

Maybe just a recap on, David, how that product is differentiated versus competition. And when you look at that overall TAM opportunity in The United States, A Couple Of Years out, what do you think a reasonable share expectation could be for that product in U. S. Dry eye? Thanks.

[David Endicott, CEO at Alcon]

Yes. Thanks, Anthony. And I'm glad you're doing the channel checks. We do too. And I think it really does give you the kind of positive vibe that I think you're getting.

[David Endicott, CEO at Alcon]

We talked to a lot of folks on P7. We did a lot of work ahead of this. You'll remember that we had this product approved for about a year before we launched it. We had to convince ourselves there was real market out there. I think we're seeing just that.

[David Endicott, CEO at Alcon]

I think it's a more intuitive thing for docs to say, hey, look, put this thing on Monday, it's going to feel great all week. You can then replace it on the following Monday and that's just way more intuitive. They feel better about getting patients out of a two week lens where they may or may not remember what they were going to do with it, when to take it out, how long they wore it. And it's just a lot more comfortable and it's at a price point that works. And so look, if you can't get somebody into a dailies lens, which is really the game, right?

[David Endicott, CEO at Alcon]

Most people want to get it, get them into a SiHy daily lens, but that's not for everybody, not everybody can afford it. You know what, this is priced correctly. It does a lot for the patient. And I think we're seeing very nice responses. It's really important to remember that, even though 60% of the value in or maybe 65% of value is in the dailies lenses in dollars, probably 55% of the patients are still in reusables and that matters.

[David Endicott, CEO at Alcon]

So we're under indexed there. So I think that's a real opportunity for us. We see it progressing nicely so far. On five twelve, look, this is a very unique product. I mean, is different than pretty much everything else out there that's been out there or that's out there now, because it's not an anti inflammatory and it's not a supplement.

[David Endicott, CEO at Alcon]

This is a product that is an agonist for natural tear production. And so very quickly when this product hits the eye, it is creating natural tears and we're excited about that. And we think that's a very different proposition that goes to the core of the problem. And so if you can solve the problem, you don't need to worry about the anti inflammatories because you don't need them. If you can solve the problem, you don't need a supplement because you don't have a tiered deficiency of any kind.

[David Endicott, CEO at Alcon]

So what's exciting about the data we're creating is, I think we're creating enough data around this to get very convinced that this is an exciting opportunity. And look, I mean, the market as you know is quite large in The United States, and we were excited to see some of the competition that our branded products do well, because I think that tells us that there's a reimbursable market out there for us. So again, wouldn't change our outlook on this. I think we're still in that kind of $250,000,000 to 400,000,000 is what we've been saying. I'll stay there, but I'm probably on the higher end of that one now.

[David Endicott, CEO at Alcon]

That's what we like and we'll see as it hits the market where it goes from there and I can update you as we get through that.

[Anthony Petrone, Managing Director Equity Research at Mizuho Financial Group]

Thank you.

[Operator]

The next question is from Tom Steffen from Stifel. Please go ahead.

[Thomas Stephan, Vice President at Stifel Financial]

Great. Hey guys. First question on contact lenses. David, you sound confident in the end markets holding solid. The legacy lenses seem to be, I think, one of the incremental headwinds in the quarter.

[Thomas Stephan, Vice President at Stifel Financial]

Can you just help us with how we should think about that part of your portfolio rest of the year? For contact lenses more broadly, are there any factors besides P7 that can help drive a reacceleration?

[Thomas Stephan, Vice President at Stifel Financial]

And I have a follow-up.

[David Endicott, CEO at Alcon]

Yes. Look, I mean, I think I wouldn't read too much into the first quarter contact lens number, really wouldn't. I think you've got some comp issues in there and you've got some price overlaps that have really caused a different number than what was really happening I think in the market. What you're asking is a really good question because we're seeing tremendous leverage in our new product flow. So we're getting great share motion on daily Sphere, daily SiHy Toric, reusable, we're getting share movement And it's causing the Hema market, which is of course our DACP and to a lesser extent our AIR OPTIX brands, our legacy brands to decline and that is an offset.

[David Endicott, CEO at Alcon]

I think we've been doing that now for I think ever since we started, we've been saying, look, we're going to move through a phase where the legacy brands go away and the new brands take over. One of the things you should observe is that the legacy brands and the reusables in particular are sorry, the new brands and the reusables in particular drive the margin. So if you've looked at the segment margin, you'll see us moving up nicely in the gross margin area. That's a beautiful thing. That's because we're moving people from old products where the volumes are declining and the costs are going up to new brands where the costs are coming down and the volumes are going up.

[David Endicott, CEO at Alcon]

So we continue to try and change over our line, if you will. We're doing that pretty efficiently right now. But again, I think it'll always be a little bit of a drag until those legacy brands kind of retire. And that in this business that generally takes a long, long time. So we'll see a little bit of drag there, but generally we're going to outperform the market on a consistent basis going forward, read the market as mid single digits.

[Thomas Stephan, Vice President at Stifel Financial]

Got it. Super helpful. And then pivoting to U. S. IOLs, David, I'll stick with you.

[Thomas Stephan, Vice President at Stifel Financial]

But I think you alluded to maybe not seeing much that was, from a share standpoint, outside your expectations.

[Thomas Stephan, Vice President at Stifel Financial]

Just a little

[Thomas Stephan, Vice President at Stifel Financial]

surprised to hear that given Odyssey momentum, Bausch's premium portfolio performing well, RxSight still growing nicely. So David, can you just dig a little deeper into why you still feel good about U. S. Share today? And if you're able to provide maybe any sort of quantification that'd be great?

[Thomas Stephan, Vice President at Stifel Financial]

Thanks.

[David Endicott, CEO at Alcon]

Well, mean, I think I said it on the market. We're two thirds of The U. S. PCIOL market today. And that's after last eighteen months or twenty four months of competition from just about everybody in the world.

[David Endicott, CEO at Alcon]

So I think what you'd observe, I think is that things like PanOptix and Vivity are very durable, very competitive products in a market where most of the competitors are $100 to $200 cheaper. And so there's a market, there's always going to be a market for less expensive. I think what you're seeing right now is a movement, people trying lenses and people some people staying with them, because they're good lenses, there's nothing wrong with them, but they aren't as good as what we think we can deliver. And I think that's where people get real comfortable. When you've seen millions of lenses implanted and great results consistently and then you improve that with Pro, I think that's why people stay with us.

[David Endicott, CEO at Alcon]

And obviously, we have a very large footprint in the surgical market. And so when you go into an you see a lot of our equipment, you see a lot of our reps, you see a lot of our energy in there. And I think there's a real loyalty to what it is that we do here. And I think that's part of why we hang on to share a little bit better than most. Now look, I mean, have we lost share?

[David Endicott, CEO at Alcon]

Of course, but we were sitting at I think 85 at one point. I mean, it was we were always going to lose share and that was just the question of how much and at what pace. So, none of that's really surprising. And maybe the one surprise that people just kind of under call is the amount of growth we've created internationally. I mean, think our share growth in international in a number of spots, but particularly China has been really, really strong.

[David Endicott, CEO at Alcon]

I mean, overall, our share is relatively flat. We've just basically traded share internationally for share in The U. S. And of course that price trade is not positive. So that's I mean, you're kind of coming up in one market and you're coming down the other one because one started all on its own and the other one was already in a competitive set when they started.

[David Endicott, CEO at Alcon]

So just I guess that's the color around this why we think it's kind of as expected.

[Thomas Stephan, Vice President at Stifel Financial]

Thanks again.

[Operator]

The next question is from Brett Fishman from KeyBanc Capital Markets. Please go ahead.

[Brett Fishbin, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets]

Hey, guys. Thanks for taking the questions. I think most of mine have been asked, so

[Brett Fishbin, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets]

I'll ask a little bit

[Brett Fishbin, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets]

of a nitty gritty question here. Just noticed that in the guidance revision, the 80 basis point headwind was attributed to both business development activities and licensing. So it sounds like the AURYON development costs is a good portion of that. Just curious if there was like another element on the licensing side or anything else that was like going into that like broader headwind? Thank you very much.

[David Endicott, CEO at Alcon]

Yes, it's mostly our end. I think the vast majority is our end, but there wasn't we acquired an asset called Silite during the quarter as well. You could find that in the notes. Again, we had a little bit of a licensing work in there as well.

[Operator]

The next question is from Yun Li from Jefferies. Please go ahead.

[Young Li, Senior VP - Equity Research at Jefferies]

Great. Thanks for taking my questions. I guess maybe one more just on U. S. ATL.

[Young Li, Senior VP - Equity Research at Jefferies]

Just on the competitive trialing dynamics, how much are you still seeing currently? How long do you expect that to persist in 2025? And then, are you going to be trialing PanOptix Pro as well to support the launch?

[David Endicott, CEO at Alcon]

So, yes, we're continuing to see sampling. Mean, comes in waves, right? When the new products come, they'll take three to six months to get people who want to try it through that process. I think you see kind of successive product after successive product coming into The U. S.

[David Endicott, CEO at Alcon]

Market. So there are probably four or five now that have been in and each one of them will bring samples with them. We've been we expect that to continue. I mean, I think there'll be another J and J launch next year. We'll see some more trialing going on later this year, I'm sure.

[David Endicott, CEO at Alcon]

And so again, I think that's probably a factor in some of this, but I think a diminishing factor kind of for the next probably twelve months or so.

[Young Li, Senior VP - Equity Research at Jefferies]

All right. Great. Very helpful. And then, I guess our Voyager checks at Askers were really positive. Saw the demo and the efficiency really jumps out for both the doc and the staffing.

[Young Li, Senior VP - Equity Research at Jefferies]

Think you're scaling manufacturing for it now, but what's your thoughts on the pathway to making it the standard of care?

[David Endicott, CEO at Alcon]

Great question. Look, I think SLT standalone, think is the standard of care. I think the challenge is how do we get it to actually be occur at the same rate people believe it should occur. And so that's the magic I think of Voyager as we get it kind of out and going. There is an emerging consensus around SLT as the first thing to do, because it keeps people off drops, it's easier, it's a good place to start.

[David Endicott, CEO at Alcon]

And so for the patient and for the doctor that seems to be a growing consensus that we see. And I think what you're going to find is that as we get this product out and as more people get the chance to use and experience it and as they get a confidence that it's really driving pressures down and it does, then I think that is going to really help drive that standard through. I do think that there's a new publication I think coming shortly on this product and that will also help. Again, think it demonstrates a similar kind of response to core SLT, which is what we've been looking at only this is a lot more efficient obviously for the surgeon. So for the comatologist or general ophthalmologist.

[David Endicott, CEO at Alcon]

So we expect a lot of positive coming on this one. We manufacturing it right now in Israel and we are moving that manufacturing to The U. S. As well. So we'll have dual locations for that product.

[David Endicott, CEO at Alcon]

So we're excited about getting all that moving.

[Young Li, Senior VP - Equity Research at Jefferies]

All right. Thank you.

[Operator]

The next question is from Jeff Johnson from Baird. Please go ahead.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Thank you. Good morning, guys. I guess, Tim, one question for you just on the implantables business. Can you remind us where we are in the phasing of the VBP tailwinds that you've been getting? I know they've been very helpful the last couple of quarters.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

When did those start to moderate versus the PanOptix Pro tailwind starting to kick in? Do you feel like the 0% implantables number we saw in the first quarter, are we at the trough? Should we see some sequential improvement in those year over year growth rates over the next few quarters? And then I have one follow-up. Thanks.

[David Endicott, CEO at Alcon]

Well, mean, I'd read the implant number as a function of The U. S. Market largely being very suppressed. And I think that has had more of an impact than anything else. I would read going forward that the VBP will have a tailwind through probably the end of next year, sorry, end of mid part of next year and then it probably then it turns over assuming they do it on time.

[David Endicott, CEO at Alcon]

And again, there's been some second runs at these China VBPs where the international VBP doesn't come on time. So we'll see. I think the scheduled time is for the middle of the year. We'll see what happens actually there.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

I think Jeff if your question is was like this quarter in a phasing perspective on a VBP. If you'll recall Q2 of last year is when we started stocking the distributors. So I think from when you're looking at a year over year in 2025 versus 2024, I think it starts to normalize in Q2.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Yes. That's kind of how I had it in my model. And that's my I guess my concern is, do we think implantables could dip even from here, this level before we start back on a recovery as PanOptix Pro builds throughout this year? Or are we kind of nearer at trough at this point?

[David Endicott, CEO at Alcon]

I'd have to look at that in some specificity. I think directionally we continue to grow share in kind of year on prior year. So the actual consumption would be a tailwind for sure I think year over year. The question is as you wrap around on the loading of inventory, there may be a temporary number that we have to worry about, probably in mostly in the Q2 frame.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Yes. Okay. And David, just as you think about PanOptix Pro building, I think you've talked about potentially then taking PanOptix, keeping that active as well and maybe pricing that down to be a little more competitive with some of the discounting we've seen from other PCIOL players. I mean how do you conceptually about PanOptix being such a good product on its own? How many docs might want to take the discounted version, if you will, of PanOptix versus pay the full rate for PanOptix Pro with the less scattering there?

[David Endicott, CEO at Alcon]

Well, I'm going to dodge your question just because I don't want to give our friends from the competition exactly what we're going to do on this one. I think in truth you do you're 100% right. We have some flexibility here. We like both of these products. The other way to play that one would be to make sure Pro was premium.

[David Endicott, CEO at Alcon]

And I think we'll see how this plays out in the market. But I think it does give us a lot of flexibility. Let me leave it at that.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Fair enough. Thanks.

[Operator]

The last question is from David Howington from JPMorgan. Please go ahead.

[David Adlington, Head of European Medtech & Services Research at J.P. Morgan]

Hey, guys. Thanks for the question. And I'm sorry, but we're going to return to tariffs, please. Just on that €80,000,000 tariff, I just wondered geographically where that was derived from. Is that U.

[David Adlington, Head of European Medtech & Services Research at J.P. Morgan]

S. To China, U. S. Into Europe? Just to sort of help us sort of think about where that might go.

[David Adlington, Head of European Medtech & Services Research at J.P. Morgan]

And then just a clarity, that £80,000,000 gross headwind, is that rate as of now? If we return to prescribed rates following the ninety day suspension, what would that impact be for this year and then potentially annualized into 2026?

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Yes. Great question. So the $80,000,000 is a split between China. It's primarily China and then let's call it and exports to China. So our levels of imports from China is relatively small.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

The way I would think about it, we picked 10%. We held them flat from that was announced through the rest of the year. And the reason we did that is I'm just not quite sure what the rate is going to be in August 15, depending on what you read. As you indicated, some folks think it's going to go back to 125%. There are other trade associations say that a vast majority of the tariffs that were announced after Liberation Day had been canceled.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

So then therefore, it would go back to 34%. So we've chose not to try to speculate as to what's going to happen and we basically treated it like we treat FX. We've snapped a point in time and that's what we've assumed going forward. So to answer your question directly, if it is 01/2025 and it does go back to August 15, that would have a material impact on four months worth of COGS in China. Now keep in mind, now a lot of that gets hung up on the balance sheet because it takes time to roll through the P and L, but would also probably have a significant impact in 2026.

[Timothy Stonesifer, Senior Vice President, CFO at Alcon]

Now what you need to be careful of is if this thing were long term and that was to happen, then obviously we would take some different strategic moves from a mitigation perspective. Again, similar to what we talked about earlier, we'd look heavily at pricing strategy, we look heavily at tax strategy, at manufacturing footprint. So I don't really want to speculate on what would happen in 2026, but that's sort of how we I don't want to dodge the question, but that's sort of how we thought about it.

[David Adlington, Head of European Medtech & Services Research at J.P. Morgan]

And then maybe just one follow-up. Are you potentially seeing any tailwinds from some of your competition potentially more exposed to tariffs, particularly on the equipment side?

[David Endicott, CEO at Alcon]

No. Look, think we're all kind of in the same spot. Think a lot of folks have a nice business in China. We have a big business in China and in Japan, both of which are countries that we mostly import from The U. S.

[David Endicott, CEO at Alcon]

So that's something to think about and obviously most of our competition do the same thing. However, I think we look very carefully in market to see what the pricing potential is for us and whether or not we can take advantage of our circumstance or somebody else's. And so we'll look market to market in the if we get into this kind of, how do we mitigate things a little more carefully. But right now our hope in particular is that cool minds will prevail here and we will see kind of a zero for zero view, on this. As I said earlier, there is not the AdriMed folks will tell you there as well the Chinese that there is not a trade imbalance between China and The United States on medtech products.

[David Endicott, CEO at Alcon]

And so there isn't a real logic for it other than its part and getting caught up in a lot of this negotiation. So our point of view right now on the whole of our business is, let's ride this out, let's be smart about it, let's be we can make the moves we need to at the right times, but let's hold our investments in R and D, let's hold behind the new product flow and let's let the new products really carry us through the end of the year. I think this is where we started the year, it's exactly where we're going to end the year. We need to get our growth going again and that's exactly what we're having a good time doing right now.

[David Adlington, Head of European Medtech & Services Research at J.P. Morgan]

That's very clear. Thank you.

[Operator]

This concludes the question and answer session. I'd like to turn the floor back over to Dan Cravens for closing comments.

[Daniel Cravens, Vice President, Global Investor Relations at American Airlines]

All right, everybody. Thanks for your time this morning and afternoon. If you have any other follow-up questions, certainly feel free for media reach out to our corporate communications team. And investors feel free to reach out to either Alan Trang or myself. Thanks again.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• David Endicott, CEO
• Timothy Stonesifer, Senior Vice President, CFO

Analysts

• Daniel Cravens, Vice President, Global Investor Relations at American Airlines
• Veronika Dubajova, Managing Director at Citi
• Jack Reynolds-Clark, VP - European MedTech Equity Research at RBC Capital Markets
• Graham Doyle, Executive Director, Equity Research at UBS Group
• Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG
• David Saxon, Senior Analyst at Needham & Company
• Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo
• Patrick Wood, Managing Director at Morgan Stanley
• Anthony Petrone, Managing Director Equity Research at Mizuho Financial Group
• Thomas Stephan, Vice President at Stifel Financial
• Brett Fishbin, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets
• Young Li, Senior VP - Equity Research at Jefferies
• Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co
• David Adlington, Head of European Medtech & Services Research at J.P. Morgan